1. (a) The determination of the initial relativities to associate with a rating factor shall be established by performing a sequential analysis. The sequential analysis shall remove the variation in loss costs already explained by prior factors.

2. (b) The sequential analysis shall analyze the rating factors one at a time, in the following order:

   1. 1. The first mandatory factor;
   2. 2. The second mandatory factor;
   3. 3. The third mandatory factor;
   4. 4. Any and all optional factors used by the insurer in accordance with subsection 2632.5(d). The order of analysis of the optional factors shall be determined by the insurer, with the exception that frequency band and severity band shall be analyzed last.
3. (c) The initial relativities, as developed, shall be balanced to a weighted average of 1.0 for multiplicative factors or balanced to a weighted average of 0.0 for additive factors. The weighting factor for the weighted average shall be the number of exposures from the data chosen for use in section 2632.8(b).
4. (d) The results of the sequential analysis shall be submitted to the Department in a computer file in a format specified by the Commissioner. Individual policy holder's name and street address need not be submitted provided the insurer includes a unique identifying number which permits tracking of the information should questions concerning data quality arise.

Note: Authority cited: Section 1861.02, Insurance Code; and CalFarm Insurance Company v. Deukmejian (1989) 48 Cal.3d 805. Reference: Sections 1861.02 and 1861.05, Insurance Code.

History

1. New section heading and text filed 9-26-94 as an emergency; operative 9-26-94 (Register 94, No. 39). A Certificate of Compliance must be transmitted to OAL by 1-24-95 or emergency language will be repealed by operation of law on the following day. For prior history, see Register 94, No. 34.

2. Repealed by operation of Government Code section 11346.1(g) (Register 95, No. 5).

3. New section filed 2-2-95 as an emergency; operative 2-2-95 (Register 95, No. 5). A Certificate of Compliance must be transmitted to OAL by 6-2-95 or emergency language will be repealed by operation of law on the following day.

4. New section refiled 6-2-95 as an emergency; operative 6-2-95 (Register 95, No. 22). A Certificate of Compliance must be transmitted to OAL by 10-2-95 or emergency language will be repealed by operation of law on the following day.

5. New section refiled 10-12-95 as an emergency; operative 10-12-95 (Register 95, No. 41). A Certificate of Compliance must be transmitted to OAL by 2-9-96 or emergency language will be repealed by operation of law on the following day.

6. Repealed by operation of Government Code section 11346.1(g) (Register 96, No. 27).

7. New section filed 7-5-96; operative 8-4-96 (Register 96, No. 27).

8. New subsection (b) filed 9-11-96; operative 9-11-96 pursuant to Government Code section 11343.4(d) (Register 96, No. 37).